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I study whether firms that receive targeted U.S. state‐level subsidies are more likely to subsequently engage in corporate misconduct. I find that firms are more likely to engage in misconduct in subsidizing states, but not in other states that they operate in, after receiving state subsidies. Using data on both federal and state enforcement actions, and exploiting the legal principle of dual sovereignty for identification, I show that this finding reflects an increase in the underlying rate of misconduct and that this increase is attributable to lenient state‐level misconduct enforcement. Collectively, my findings present evidence of an important consequence of targeted firm‐specific subsidies: nonfinancial misconduct that potentially could impact the very stakeholders subsidies are ostensibly intended to benefit. [ABSTRACT FROM AUTHOR]

The Occupational Safety and Health Administration (OSHA) is decentralized, wherein field offices coordinated at the state level undertake inspections. We study whether this structure can lead to interstate frictions in sharing information and how this impacts firms' compliance with workplace safety laws. We find that firms caught violating in one state subsequently violate less in that state but violate more in other states. Despite this pattern, and in keeping with information frictions, violations in one state do not trigger proactive OSHA inspections in other states. Moreover, firms face lower monetary penalties when subsequent violations occur across state lines, likely due to the lack of documentation necessary to assess severe penalties. Finally, firms are more likely to shift violating behavior into states with greater information frictions. Our findings suggest that internal information within regulators impacts the likelihood and location of corporate misconduct. [ABSTRACT FROM AUTHOR]